Compensation is more than wages and salaries. And when you consider that, things look better than some headlines suggest.

You may have seen the report for Pew Research Center with the discouraging headline: For most Americans, real wages have barely budget for decades. 

On the face of it, these should be heady times for American workers. U.S. unemployment is as low as it’s been in nearly two decades (3.9% as of July) and the nation’s private-sector employers have been adding jobs for 101 straight months – 19.5 million since the Great Recession-related cuts finally abated in early 2010, and 1.5 million just since the beginning of the year.

But despite the strong labor market, wage growth has lagged economists’ expectations. In fact, despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.

Not good. Fortunately, it’s also not complete. And when you fill in the gaps, the picture is considerably more positive.

In a Bloomberg column, Ramesh Ponnuru breaks it down. The column is short (aren’t they all these days?) and clearly explains why the Pew assessment is overly bleak. 

He identifies two basic problems:

1) Compensation consists of wages and benefits, with benefits having grown more rapidly than wages in recent years,

2) Pew uses a flawed measure of inflation.

We’ll quote the column briefly.

With respect to benefits:

The first reason this news should be less disturbing than it appears is that compensation includes benefits, not just wages, and the proportion of benefits to wages has been rising. Average compensation must therefore have risen faster than average wages have.

Drew DeSilver’s write-up of the findings for Pew mentions this issue prominently, and links to a Bureau of Labor Statistics compendium that shows how much difference non-wage compensation can make. From 2001 through 2018, the average civilian wage grew 5.3 percent; average compensation grew 10.4 percent, almost twice as much.

And regarding inflation:

Pew appears to be using a measure of inflation called CPI-U, which is produced by the Bureau of Labor Statistics and used by many other researchers. But as Scott Winship, then an analyst at the Manhattan Institute, detailed a few years ago, that measure overestimates inflation — and vastly overestimates its cumulative impact over time…

The government produces a statistic that does not have these flaws and goes back to 1929: the PCE deflator. Use that better measure of inflation, and the flat trend line in wages since 1978 that Pew found becomes a 22 percent increase. Real compensation, including benefits, must have grown even more. (For those readers wondering whether that apparent progress just reflects growth at the top of the income distribution, Winship has calculated that workers in the middle of the distribution saw a 31 percent increase in compensation from 1967 to 2015.)

DeSilver’s article for Pew acknowledges some of the challenges, as Ponnuru writes. Here’s DeSilver’s conclusion.

Wage stagnation has been a subject of much economic analysis and commentary, though perhaps predictably there’s little agreement about what’s causing it (or, indeed, whether the BLS data adequately capturewhat’s going on). One theory is that rising benefit costs – particularly employer-provided health insurance – may be constraining employers’ ability or willingness to raise cash wages. According to BLS-generated compensation cost indices, total benefit costs for all civilian workers have risen an inflation-adjusted 22.5% since 2001 (when the data series began), versus 5.3% for wage and salary costs.

Other factors that have been suggested include the continuing decline of labor unions; lagging educational attainment relative to other countries; noncompete clauses and other restrictions on job-switching; a large pool of potential workers who are outside the formally defined labor force, neither employed nor seeking work; and broad employment declines in manufacturing and production sectors and a consequent shift toward job growth in low-wage industries.

While those factors may certainly have some validity, there are two very good reasons for believing the situation is not as bad as the headline contends. 

New study documents successful public and private transit partnerships.

A few weeks ago we examined the proposition that “transportation network companies” (TNCs, the new jargon for ride-share services like Lyft and Uber) posed a threat to mass transit. So we were intrigued by a new report documenting successful partnerships between TNCs and public transit agencies. 

One of the authors writes about their research in New Geography.

Facing growing pressure to try new things, many transit agencies and municipal governments are experimenting with strategies that involve ridesharing. Our new study, Partners in Transit: A Review of Partnerships between Transportation Network Companies and Public Agencies, describes more than two dozen partnerships around the country designed to allow transit operators and TNCs (predominately Lyft and Uber) to concentrate on what they do best. TNCs fill gaps, offer “first- and last-mile” solutions, and augment service to those with mobility challenges, while transit providers direct resources to modernizing top-performing routes, serving commuters, and other core strengths.

The idea behind many partnerships is that a properly designed program can be less expensive than buying buses and paying for labor, fuel, and maintenance on lightly used routes. They also give public bodies experience with emerging technologies and can boost the public image of transit, not to mention get travelers to their destination faster. The pace at which partnerships are emerging across the country deserves far more attention than it has received.

The map below identifies the partnerships examined, including one in Tacoma.

Such experiments can be challenging.

Still, both large and small agencies are testing the waters: 11 of the 50 largest transit agencies in the United States have experimented with some form of partnership.

Expect more to come. 

What comes next? Being able to pay for both rideshares and transit – and connections between the two – on a single app. Up until now, customers must buy pay two fares when making ridesharing/transit connections. This inconvenience will end once sensitive issues such as protecting private information and technological hurdles can be crossed.

Considering the speed at which ridesharing is growing, more agencies will likely reach out to Lyft, Uber and other providers to test out new strategies in the next couple years.

It sounds promising.

Just how real is the urban-rural divide? Does it matter? Our Friday Roundup looks at the question.

The “urban-rural divide” has become a standard touchstone in discussions of economics, politics and culture. It’s shorthand for identifying that major metros have more in common with each other than they do with the countryside surrounding them.

The Seattle metro area is not like Central Washington or the Olympic Peninsula (or pick any other largely rural part of the state). By the same token, Chicago isn’t like Downstate Illinois; the Twin Cities aren’t like the Iron Range; New York City isn’t upstate New York; and so on. 

It’s an easy concept to grasp. But what does it tell us about divisions in our state and nation? What does it suggest to you? Please scroll to the bottom to let us know your views.

We’ve written about it often.

Just this year, for example, we published a series of posts exploring the differences and what they mean to public policy.

And then this:

Obviously, the subject interests us and, we suspect, it interests you as well. So a report we came across earlier this week sparked us to round up a few brief and recent articles that suggest additional complexity.

There’s a persistent narrative that President Trump’s values are rural ones, while city-dwellers support the “urban” values of democratic socialists like Alexandria Ocasio-Cortez… At first glance, the “urban-rural” divide seems reasonable. But the data don’t support this geographic line of thinking…

Urban areas are at the leading edge of racial and ethnic change, with nonwhites now a clear majority of the population in urban counties while solid majorities in suburban and rural areas are white. Urban and suburban counties are gaining population due to an influx of immigrants in both types of counties, as well as domestic migration into suburban areas. In contrast, rural counties have made only minimal gains since 2000 as the number of people leaving for urban or suburban areas has outpaced the number moving in. And while the population is graying in all three types of communities, this is happening more rapidly in the suburbs than in urban and rural counties.

At the same time, urban and rural communities are becoming increasingly different from each other politically. Adults in urban counties, long aligned with the Democratic Party, have moved even more to the left in recent years, and today twice as many urban voters identify as Democrats or lean Democratic as affiliate with the Republican Party. For their part, rural adults have moved more firmly into the Republican camp. More than half (54%) of rural voters now identify with or lean to the GOP, while 38% are Democrats or lean Democratic.

More than 61 percent of voters cast ballots in counties that gave either Clinton or Trump at least 60 percent of the major-party vote last November. That’s up from 50 percent of voters who lived in such counties in 2012 and 39 percent in 1992 — an accelerating trend that confirms that America’s political fabric, geographically, is tearing apart.

Of the nation’s 3,113 counties (or county equivalents), just 303 were decided by single-digit margins — less than 10 percent. In contrast, 1,096 counties fit that description in 1992…

For all the ways Americans are divided today along urban and rural lines, the two groups are at least united in this: Majorities of both, according to a new Pew Research Center survey, believe that everyone else is looking down on them.

That pattern suggests a particularly troubling dimension to age-old distinctions between city and rural life. Differences in where and how Americans choose to live, which increasingly overlap with politics, are imbued with judgments about each other — and suspicion that others are negatively judging us.

We’ve all heard of the great divide between life in rural and urban America. But what are the factors that contribute to these differences? We asked sociologists, economists, geographers and historians to describe the divide from different angles. The data paint a richer and sometimes surprising picture of the U.S. today.

National League of Cities: Bridging the Urban-Rural Economic Divide

In a challenge to the conventional narrative, Bridging the Urban-Rural Economic Divide finds that stronger links between urban and rural areas are key to spurring local, regional and state economic growth.

By examining four key areas — broadband access, educational attainment, high-value business growth and prosperity growth — the report offers policymakers glimpses into policy and program opportunities to bridge the urban-rural divide. 

It’s time for the narrative to change from urban vs. rural to a shared economic future. 

…a close look at the data shows that urban and rural America are not as distant, economically or geographically, as the rhetoric may suggest.

So, now it’s your turn.

  1. Thank you for your input!

Columbian editorial calls for Congress to act on trade, farm labor shortage as growers face increased challenges

The Columbian editorial board today called on Congress to take action to resolve trade barriers and farm labor shortages that are hurting Washington agriculture.

President Trump’s trade war and the failure of Congress to address a shortage of farm workers do not bode well for Washington agriculture. To avoid devastating consequences, our Washington needs effective governance to come from the other Washington.

Last month, we wrote about the negative impacts tariffs were having on cherry growers. The Columbian’s editorial points out wider effects.

…the state Department of Agriculture estimates that nearly $650 million worth of exports are at risk — $480 million to China and $166 million to Mexico.

When the president announced plans to increase tariffs on steel and aluminum imports from China, Mexico and other countries, experts warned that retaliatory tariffs from trading partners would target American workers. Trade wars — like all wars — result in collateral damage, and that damage is being felt by Washington growers. Locally produced crops such as apples, wheat, cherries and hay have been included on tariff hit lists from trading partners.

It’s a fact-filled editorial, detailing stark consequences for our state’s trade-driven agricultural economy if the trade war continues. The Lens also looks at the issue.

Washington’s agricultural stakeholders continue asking the Trump administration to resolve problems stemming from the current trade war between the U.S. and other major trading partners for farm-related products…

At the end of July, President Donald Trump tried to alleviate some of the negative effects when he announced a $12 billion emergency farm aid plan to help farmers struggling within the trade war. The $12 billion strategy includes federal payments to growers and assistance with opening new markets.

Washington growers, however, told Governor Jay Inslee that they are interested in “trade, rather than aid.”

Trade policy, however, is not the only challenge facing Washington agriculture. As we wrote previously, Washington growers are facing a labor shortage affecting their ability to bring in the harvest.

The Columbian editorial calls on Congress to step in.

Meanwhile, congressional members also have failed to address the labor shortage that is hampering farmers. Agriculture relies heavily upon seasonal workers, who often are undocumented; with a crackdown on border controls and with deportations increasing under the Obama administration and further increasing in the Trump era, farmers are having difficulty finding workers to pick their crops. While it is essential that immigration laws be enforced, there also is a need to adjust regulations allowing for seasonal workers, lest crops go unpicked.

H.R. 6417, co-sponsored by Rep. Dan Newhouse, R-Sunnyside, would attempt to address some of the issues involved. The bill was introduced in July but not acted upon before Congress left for its summer recess, and it has received mixed reactions from farm groups.

For our state’s agricultural sector, the clock is ticking. These issues require a timely resolution.

For city coffers, Seattle soda tax looks like a winner: $10 million in 6 months. For consumers & businesses, maybe not so good.

In six months, Seattle’s controversial soda tax has poured more than $10 million into the city treasury, the Seattle Times reports.

Seattle has collected more than $10 million in the first six months of its tax on sugar-sweetened beverages, raising the possibility the tax could generate more money this year than anticipated. It’s so far unclear whether buying habits are changing.

Times reporter Daniel Beekman writes that a pre-tax survey found that most adults in Seattle supported the tax, though support was weaker “among black and Asian respondents and people with lower incomes.” So far, he adds, it’s not clear how the tax has affected consumer behavior.

…researchers have yet to complete analyses of consumption and sales patterns in the first months of the tax meant to discourage unhealthy choices, so they know nothing for certain about its impacts.

The researchers just released a “baseline report.

While the data are not yet conclusive,

Anecdotally, the tax seems to be deterring some consumers from buying sugary beverages in Seattle or at all, [University of Washington epidemiology professor Jesse]  Jones-Smith said.

“I’ve heard stories about sticker shock,” she said.

We’ve written about the tax previously, for example here and here. An initiative to preempt other cities from following Seattle’s lead, I-1634, has qualified for the fall ballot. 

Closing the skills gap, boosting college completion and accelerating credential attainment: Expanding opportunities

Over the last few years, we’ve written a lot about the importance of a postsecondary credential or some college to securing one of the thousands of great jobs being created in our state. The evidence continues to accumulate.

Today, the Associated Press reports that there are, again and still, more jobs available than there are job seekers to fill them.

The Labor Department said Tuesday that job openings barely increased, rising 3,000 to 6.66 million. That’s more than the 6.56 million people who were searching for work in June. It’s also close to April’s figure of 6.8 million, a record high. Overall hiring slipped to 5.65 million from 5.75 million, and the number of people quitting their jobs declined slightly to 3.4 million from nearly 3.5 million in May.

The figures reflect a robust job market. The unemployed typically outnumber job openings, but that reversed this spring amid strong demand from employers. Businesses are optimistic about the outlook and stepping up hiring in anticipation of solid future growth.

The imbalance should boost wages and lead discouraged workers back into the labor pool. There are indications of both, though slower than some anticipated. And, yes, some firms are reducing expectations of experience and education. But the real challenge facing many employers remains finding workers with the education and training necessary to do the job.

City Journal takes a look at successful approaches to closing the skills gap. Many will be familiar to you. Milton Ezrati writes,

According to the Department of Labor, more than 6.5 million jobs remain unfilled because employers can’t find workers with the necessary skills. Some of this shortfall may reflect the fact that U.S. unemployment rate is historically low, but much of it stems from inadequate worker training. The problem shows up clearly in the widening wage gap for skilled work, which extends beyond the well-documented distinction between the earnings of the college-educated and those with only a high school diploma or less.

He looks at some of the challenges faced in meeting the training and education challenge. 

A viable alternative for the United States: apprentice-like programs structured as partnerships between community colleges, technical schools, and employers. In these arrangements, the school acts on behalf of students to secure apprenticeships, sometimes referred to as “internships,” with local employers. Many corporate participants have roots in foreign countries, where management, especially the Germans and Japanese, are familiar with apprentice programs. But American employers have also participated. The income these “apprentice interns” earn helps defray the cost of tuition and ameliorates individual concerns about foregone income while training. Several nonprofits involved in these efforts have offered support and leverage to expand these programs…

Getting American workers the training they need will require a long-term commitment from many quarters. It will demand experimentation to find out what works with which groups and in which regions, and it will necessitate some trial-and-error.

College completion is another challenge affecting workers. As Frederick M. Hess and RJ Martin write,

Less than half of students at four-year colleges graduate within six years, and not even 40 percent of students at two-year institutions finish within three. For these students, dropping out comes at a cost of thousands — or tens of thousands — sunk into tuition and student loans, with little benefit on the job market, and without much else to show for it other than wasted time and energy. 

They review several efforts to boost completion rates, suggesting encouraging possibilities. We’ll provide the intro and one example, and encourage you to read their article.

If the goal is to maximize the chance that those students able and willing to do the requisite work will earn their degrees, there are a number of promising initiatives worth exploring. Those mentioned here, and a number of others, are sketched out in a new book on college completion, issued jointly by the American Enterprise Institute and Third Way.

For one, colleges can offer more holistic financial and academic support to disadvantaged students. The City University of New York (CUNY) enrolls over 25,000 low-income students whose academic records fall just below regular admissions standards. These students are enrolled through targeted programs called SEEK and ASAP, which assign participating students to counselors who have low caseloads; provide students extensive academic tutoring to help them catch up; and guarantee enough grant aid to cover tuition, fund transportation, and defray the cost of books. The results are promising: A 2015 evaluation found that 40 percent of ASAP participants graduated, compared to only 22 percent of similar students not enrolled in the program. And the benefits of this holistic support extend beyond graduation — alumni of SEEK earn up to $4,000 more per year than similar students.

The James G. Martin Center for Academic Renewal offers another perspective on how to boost postsecondary academic achievement. Again, the focus is credential attainment. The examples are from North Carolina.

Credentials are mostly offered by community colleges as an alternative to more expensive and time-consuming bachelor’s or associate’s degree programs. They are tailored to fit a specific skill, industry, or even company…

In general, community colleges work closely with companies and industries in order to ensure the viability and relevance of credentials. Ian Gibbons, the Employer Relations Coordinator at Wake Technical Community College, explained the partnership using IBM as an example in a Martin Center interview. Last year, a joint effort between IBM and Wake Tech made headlines for its focus on “new collar jobs”—in this case, IT jobs in cloud software, data science, and cybersecurity. The project includes new curricula but also incorporates internship opportunities at IBM for Wake Tech students.

There are more examples. The article is also clear on the challenges in designing programs that work, from financial challenges to making sure the training matches employer demand. Yes, in the end,

Outcomes measures from NC Tower show that students who graduate with certificates have high rates of employment in the state and competitive starting salaries…

Even with so many hurdles for students and policymakers, growth in credential programs is a welcome change for individuals and the market. They are affordable, flexible complements to the two- and four-year degrees that dominate the postsecondary landscape. As the economy continues to change, credentials promise to be an important part of meeting workforce needs.

Yes.

 

 

 

 

As the national economy continues robust growth, Pacific Northwest looks good: Perspective from Oregon Office of Economic Analysis

Employers added 157,000 jobs nationally in July and the unemployment rated dropped to an eighteen-year low.

U.S. employers slowed their hiring in July, adding 157,000 jobs, a solid gain but below the healthy pace in the first half of this year.

The unemployment rate ticked down to 3.9 percent from 4 percent, the Labor Department said Friday.

The AP adds,

Consumers are spending freely and businesses are stepping up their investment in buildings and equipment, accelerating growth. That’s raising demand for workers in industries ranging from manufacturing to construction to health care.

Of more interest to many of us, though, may be this report from Josh Lehner from the Oregon Office of Economic Analysis. It draws from a recent presentation he gave looking at the Washington and Oregon economies.

Overall there is not a massive difference between the states in terms of where they are in the business cycle, the risks to the outlook, and the like…

What did stand out to me in preparing for the talk was that all of the Northwest is expanding. And all of the region’s urban areas are at record employment levels. Tri Cities leads the pack, but Bend is close behind, showing both the largest employment losses in recession and the strongest growth since.

He also comments on an issue we’ve followed: the different economic experiences of urban and rural communities.

Like Oregon, Washington’s rural employment trends fall into two big categories. Instead of the north-south divide Oregon has in terms of economic growth this cycle, Washington sees an east-west divide. Jobs in Oregon’s northern rural counties and in Washington’s eastern rural counties are at historic highs. The same cannot be said for Oregon’s southern rural counties and Washington’s western rural counties. While I did not do a full decomposition to figure out what exactly is driving these trends, we do know one common variable across both regions is their historic strength in timber. While the sector is growing again, it does remain significantly smaller than prior to the recession, let alone 40 years ago.

Not to mention the struggles in Central Washington as growers face labor shortages that threaten their ability to bring in the harvest.

Lerner offers an interesting brief analysis. We recommend it.

Are ride-share services (Uber/Lyft) a boon or bust for mass transit? See our Friday Roundup today.

Ride-share services like Uber and Lyft, virtually unknown a few years ago, have become ubiquitous in metro areas. Their effect on transit and urban congestion has become a contentious issue, with opponents and proponents each able to point to research to support their positions. 

And it’s not just the impact on transit and congestion that has metro politicians concerned. The Seattle City Council attempted to break new ground (does that have a familiar ring?) by adopting legislation (currently placed on hold by a federal court) that would allow ride-share drivers to unionize. That effort, initiated two years ago, drew national attention and opposition from the U.S. Chamber of Commerce.

The New York Times reports subway ridership has been dropping as “passengers flee to Uber.”

n another alarming sign of the crisis plaguing New York City’s subway, ridership dropped for the second year in a row as passengers flee the system for Uber and other ride-hailing services, draining the transit system of badly needed revenue…

But the declining subway ridership could have wide-ranging consequences: It could hurt the transit agency’s finances, increase street congestion and stall the city’s economic success as it competes against global cities with better transportation networks.

Concern about finances has prompted officials to consider new regulations.

The growing concerns about gridlock on city streets has prompted the City Council to consider new legislation to rein in Uber and other services by setting a cap on new vehicles.

The NYT cited a study by Bruce Schaller, a consultant who had previously served as a deputy commissioner for the city’s transportation department, who begins by noting how these services have become transformative.

Municipal and civic officials in cities across the country are grappling with how to respond to the unexpected arrival and rapid growth of new mobility services. These include ride services such as Uber and Lyft (also called Transportation Network Companies, or TNCs), “microtransit” companies suchas Via and Chariot and more recently dockless bikeshare and electric scooter offerings.

Here’s the conclusion from the executive summary of the report.

New mobility has much to offer cities: convenience, flexibility, on-demand technology and a nimbleness to search for the fit between new services and inadequately served markets. But development of ride services must take place within a public policy framework that harnesses their potential to serve the goals of mobility, safety, equity and environmental sustainability. Without public policy intervention, big American cities are likely to be overwhelmed with more automobility, more traffic and less transit and drained of the density and diversity which are indispensable to their economic and social well-being.

CityLab writer Laura Bliss also looks at the ride-share services, citing difficulty in obtaining good data from the companies themselves. Among her observations,

To be sure, Uber, Lyft and other TNCs aren’t winning an especially hard-fought battle for riders. Service cuts and performance declines on many transit systems—especially bus networks—offer passengers little reason to stay loyal. In some cities, the rise of ride-hailing may be as much a statement on the quality of public transit as anything else. Schaller estimates that, in 2018, the number of annual for-hire vehicle passengers (which includes ride-hailing and the ever-shrinking pool of taxi trips) will outstrip the number of bus riders nationwide. “[This] shows the acute need for public transit to provide the same level of prompt, reliable and comfortable service that’s attracting people to TNCs,” he said via email.

An Investor’s Business Daily editorial contends the services are hurting mass transit and that’s OK.

But Uber and Lyft aren’t just substituting one form of transportation for another, they’re creating entirely new opportunities for people to get around.

In New York, taxi pickups in the city declined by about 5 million between 2014 and 2018, but ride sharing trips exploded by almost 15 million. Clearly, all those extra trips were coming from somewhere other than taxis, rail and buses….

Ride-sharing services are producing ancillary benefits as well. Demand for parking lots is declining in cities, freeing up valuable real estate for more productive uses…

Ride-sharing is also serving low-income neighborhoods that had few options before. And the increasing use of ride sharing is also cutting down on drinking and driving — thereby saving lives.

And then there are benefits to drivers who are turning their cars into cash cows, which means more tax revenues for city governments.

So, what’s the problem?

Back in February, the AP noted that the ride-share services increased urban traffic congestion and that competition with mass transit was becoming more direct.

One promise of ride-hailing companies like Uber and Lyft was fewer cars clogging city streets. But studies suggest the opposite: that ride-hailing companies are pulling riders off buses, subways, bicycles and their own feet and putting them in cars instead.

And in what could be a new wrinkle, a service by Uber called Express Pool now is seen as directly competing with mass transit.

In January, Wired looked at the issue in an article headlined, “turns out Uber and Lyft might not be ruining the American city.” Again, noting inconclusive data and the oft-cited Bruce Schaller, Aarion Marshall reported,

[Sharon Feigon, the executive director of the Shared Use Mobility Center] and her colleagues’ conclusions mostly comport with recent research on the relationship between new mobility companies and transit. First, people don’t always abandon public transit for Uber and its brethren. The researchers compared transit usage to ride-hailin’ riders in five cities (Chicago, DC, LA, Nashville, and Seattle) between 2010 and 2016, and found little relationship between the long-term trend lines and and peak-hour ride-hailing usage. In English: No one large city is abandoning public transit commuting en masse directly because of Uber or Lyft.

There’s clearly a lot to sort out. In Seattle, Mayor Jenny Durkan is forming a council of tech leaders to look into the city’s challenges, including transportation. Geek Wire reports,

It’s the mayor’s latest effort to bridge the gap between the tech industry and City Hall and harness the expertise of technologists to mitigate the consequences of rapid growth.

There are a lot of studies, plenty of punditry and advocacy, and policymakers poised for action. What do you think should be the response? 

We have three questions for you to consider.

Thank you!